India’s major software firms say a U.S. economic slowdown may bring more customers seeking cost savings, but analysts warn that the once red-hot sector could face tough times in 2008.

Tata Consultancy Services Ltd, Infosys Technologies Ltd and Wipro Ltd, whose latest earnings were hit by a sharp gain in the rupee against the dollar and the U.S. credit crunch, expect clients to send more work to low-cost India even as they pare overall technology budgets. Wipro, which reported third quarter earnings Jan. 18, said most clients had prepared their 2008 budgets this month and that some had cut information technology spending.

“But that does not automatically mean their outsourcing and off-shoring budgets are going to slow down,” said Girish Paranjpe, the executive who deals with Wipro’s financial services customers — its most lucrative clientele. “Sometimes it gives more impetus, rather than less, to do more offshore.”

Still, even if U.S. clients farm out more IT work to India as they tighten spending, they would negotiate lower prices, which will dent the billing rates of software makers, analysts say.

“We are cautious about the outlook for the IT sector because of the situation in the U.S.,” said Harit Shah, an analyst at Angel Broking in Mumbai. “The picture will get clearer by the end of the next quarter.” The U.S. is the biggest market for Indian software and service exports, which jumped 33 percent to $31.4 billion (Rs1.23 trillion) in the year ended March, and are forecast by the industry group the National Association of Software and Services Companies to hit $60 billion by 2010.
|TOP|Thinking Local in India, Finding Global Fixes

Three years after starting with the premise that a problem has better chances of being solved by being close to it, Microsoft Research India is ready with a tool that could make online location search here and in other countries easier and more accurate.

The Bangalore lab of MSR has developed a new system that can handle ill-formed or ambiguous text queries, particularly applicable to India where it is commonplace to find landmarks (“Near Shiva Temple” or “OppositeGovt.High School”) or intersection of streets part of addresses.

The search system is independent of region and can support widely different address formats.

“Even globally, address geocoding is challenging because there is no single address format that applies to all geographies,” said Joseph Joy, who leads this research group at MSR India. Geocoding is the process of identifying a place by indicators such as latitude-longitude coordinates.

Microsoft researchers have built a prototype location search system using this technique that supports several cities in three countries with varying addressing schemes: Bangalore, India; Seattle and surrounding cities in the U.S.; and London in the U.K.

“We have found that our system not only provides results on a variety of location queries in any of these cities, but it significantly outperforms existing geocodes on all ill-formed and free-form query types,” said Vibhuti Sengar, a co-developer of the system at MSR India, referring to providers Google Inc. and Yahoo Inc. Typing queries in Hindi, he demonstrated, how unstructured queries such as “near RTO office on 2nd Main, Indira Nagar, Bangalore” gave accurate results that other search systems could not match. The piece of research is set to enter the Microsoft mapping service, MSN Live Local Maps, but the researchers didn’t know how soon.
|TOP|Q3 Up

New York-listed Satyam, which specializes in business software and offers back-office services, said consolidated net profit for its fiscal third quarter ended Dec. 31 rose to Rs. 4.34 billion ($110 million) from Rs. 3.37 billion reported a year earlier.

Satyam is a leading global business and information technology company that delivers consulting, systems integration, and outsourcing solutions to clients in over 20 industries.

Satyam has nearly 49,200 professionals. It has strategic alliances with 96 best-of-breed technology companies, and operates through 27 state-of-the-art development centers in the U.S., Canada, Brazil, the U.K., Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia. Saytam serves 630 global companies, of which 181 are Fortune Global 500 and Fortune U.S. 500 corporations. Its presence spans 61 countries, across six continents.
|TOP|Top Five

India is expected to become one of Intel Corporation’s top five markets within the next three years, fuelled by growth in smaller cities. The country is already the fastest growing market for the world’s largest chipmaker.

“India is number eight right now for us. In another 2.5-3 years, it would climb to number three or four. The level of attention that India commands today at Intel in terms of resources and strategic focus is similar to what China had in the mid- to-late 90s,” said Intel’s marketing and operations director for South Asia, John McClure. U.S. and China are the top two markets for Intel. Other major markets are France, the U.K., Germany, Japan and Brazil.

It’s the smaller cities that Intel is betting on to drive growth, with plans to focus more on marketing in the hinterland. While 60 percent of the PC consumption happens in the top 70 cities, the growth is much faster in smaller cities, McClure says.

Apart from smaller cities, it is also counting on growth in small businesses, meaning any business employing up to 100 people. After all, the small business segment makes up 30 percent of India’s PC market, says McClure.

“There is a very rapid adoption of notebook PCs by the small businesses. However, PC density among small businesses in India is still five times less than that in China. There is a lot of untapped potential,” he added. Early this year, Intel launched the SMB (small and medium businesses) Advantage Program to assist its channel partners to increase business with SMBs.

Another consumer segment that is high on Intel’s mind is youth. It is conducting a pilot project in tier-II colleges in Pune where it conducts sessions explaining its technology and then organizes quizzes around that.
|TOP|$200 PC

Chinese computer giant Lenovo said it is planning to launch its $200 (about Rs.8,000) personal computer in India soon.

“We will launch the product in China first and after getting the feedback we will roll out the device in the Indian market,” Lenovo Group U.S. president and chief executive officer William J. Amelio said on the sidelines of India Economic Summit.

“The device would be Internet enabled,” he said refusing to provide details of the time line of the launch.

The company is also mulling over exporting notebooks from its Baddi plant in Himachal Pradesh.

Amelio also asked the government to provide a uniform tax regime so that it creates a favorable environment for companies like Lenovo to do business in India.
|TOP|New Unit

Outsourcing pioneer Tata Consultancy Services, which was the first to recognize the potential of Latin America nearly six years ago, now plans to use the experience it gained in serving those markets to fashion its emerging markets strategy.

The firm has created a new business unit within the company which will focus exclusively on emerging markets such as Russia, the Middle East, South Africa and other potentially big IT markets. Gabriel Rozman, who was reportedly hand-picked by Ratan Tata himself, spearheaded the company’s operations in Ibero America (which TCS defines as comprising of Latin America, Spain and Portugal). Now, he will head TCS’ emerging markets expansion.

Rozman said that TCS plans to get its next $1 billion revenue from such growth markets.

“If there is a recession in the U.S., some of these will provide counter recession revenues,” Rozman said, however, adding that the firm devised its emerging markets strategy much before the subprime crisis surfaced.

Unlike the more homogeneous English-speaking markets of the U.S. and U.K., the emerging markets unit will have several sub-region teams working under the broad central structure for emerging markets. A specialized M&A team focusing exclusively on emerging markets will also be formed to drive growth in the region.
|TOP|Eyeing Capgemini

IT giants Infosys and Wipro, who were said to be keen to acquire $13-billion Capgemini, may not be interested in the whole business of the European consulting and technology company.

According to sources, Infosys and Wipro may now bid for specific verticals of Capgemini. The Indian IT giants, who have enough cash assets for a large buyout, are not interested in complete company acquisition because of stringent labor laws in France (where the company is headquartered) and other parts of Europe, sources said.

The stringent laws would have prevented restructuring of employee base to suit the offshore model followed by Indian companies. It remains to be seen who will emerge a winner as Capgemini has still not decided whether to sell its assets in parts or whole.

“It remains to be seen whether Capgemini will consider it. There is a new team at the top and we are getting ambiguous signs,” said an official of a firm which is close to the development. Both companies are keen on taking over of a specific vertical like healthcare or BPO. When contacted Wipro CEO Sudip Nandy refused to comment on the Capgemini deal. He however added: “Wipro would be open to acquiring a vertical or part of a European IT major, as it makes much more sense.”

Experts also rate it as a sound decision. Says an industry leader close to the deal, “Europe is not as aggressive on offshoring as U.S. Why take over 5,000 French employees on board when you can get the same work done at its 40 percent cost in India? Restructuring of the company will be very difficult. You cannot retrench European employees of the company because of strict labor laws. So a large European buy won’t be as attractive as a U.S. buy.”
|TOP|More Employees

Continuing with its focus on recruiting more new employees, Wipro is looking to change the ratio of fresh employees versus lateral hires in the company from 50:50 to 65:35 in FY09. Wipro has given out job offer letters to 14,000 rookies from engineering colleges for FY09. It is also stepping up focus on hiring non-engineering graduates and has made 3,500 offers to BSc graduates, Wipro executive vice-president H.R. Pratik Kumar said.

“We have been inducting non-engineers for 10 years now in small batches but decided to ramp up the number last year. Last year, we gave offers to 1,500 BSc graduates, we have hiked the number to 3,500 for next fiscal.” These will be from the BSc Maths, physics and chemistry streams.

In Q3, Wipro made a gross addition of 4,900 people of whom about 2,500 were new employees. For the nine months till December 31, 2007, it has added 15,500 people including 8,000 new employees. Total head count now stands at 79,832 employees including 59,925 people in IT services and products business and 19,907 staff in BPO. The overall attrition rate in Q3 remained flat at 18 percent while voluntary attrition stood at 15.7 percent.

Meanwhile, Wipro Infotech registered revenues of Rs 971 crore, a growth of 39 percent. During the quarter, Wipro Infotech won two large deals including the IT company’s biggest ever deal — a nine-year business transformation contract from telecom company Aircel worth $450-600 million. The other was a five-year IT services contract from Reliance Capital in partnership with Tech Reliance.
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